Dodla Dairy has designed numerous competitive positive aspects in the speedy developing dairy market. Apart from cluster strategy in South India, it has created (i) powerful brands (ii) one hundred% direct milk procurement network and (iii) direct distribution model. The firm also focusses on solutions that produce RoCE in excess of expense of capital such as milk and curd, and has negligible/nil presence in money burning solutions like ghee, cheese and whey. Milk procurement in South India is developing at ~10% per annum. Dodla has expanded its market place share from .6% in FY08 to ~1% in FY21.
Considering market place development and market place share expansion prospective, we model Dodla to report mid-teens income development in medium term. We forecast 14.2% and 17.6% CAGR in income and PAT, respectively more than FY21-23e. We initiate coverage with Buy and DCF-based TP of Rs 700 (24x FY23e). We forecast RoE to be upwards of 17% in FY23e. Key dangers: Potentially larger competitive intensity in South India and delay in distribution expansion.
Cluster strategy: Dodla focusses largely on South India. It also designed powerful brands through brand creating spends in regional languages. The firm is steadily penetrating smaller sized towns and semi-urban markets. Considering steady development prospective in South India, we think cluster strategy will continue to be a crucial competitive benefit for the firm.
Creation of competitive positive aspects: Dodla’s competitive positive aspects include things like: (i) Strong brands like Dodla Dairy, Dodla+ and KC+. It has steadily improved ad-devote to sales to strengthen its brand equity (ii) it procures ~one hundred% milk straight from farmers (iii) it has also designed powerful distribution network for promoting milk and curd to customer households.